According to The Sopranos: A Family History, Peter Paul Gualtieri, son of Gennaro Gualtieri (although Paulie's biological father was later revealed to be a World War II soldier named "Russ"), has been a troubled street kid from the age of nine. He dropped out of school after the ninth grade[4] and spent time in and out of juvenile correctional facilities during his early youth. When he was seventeen, he officially became an enforcer/bodyguard for "Johnny Boy" Soprano, Tony's father and captain in the DiMeo crime family. His mother, later discovered to be his aunt, worked at a Krispy Kreme doughnut shop during Paulie's childhood and early adulthood, but has since retired. Paulie's grandfather, who emigrated to the United States in 1910, is from Ariano Irpino, a municipality in the province of Avellino, in Italy's Campania region.[5] Paulie's grandfather and Tony's paternal grandparents were from the same province in Italy.

Paulie spent four years in the U.S. ArmySignal Corps, where he was eventually drummed out through Section 8 (discharged because of psychiatric reasons). Although Paulie did not have a long military career, he still is proud of it, and few of the other Sopranos characters had military experience. Afterwards, he spent more time in and out of prison on various criminal charges. Eventually, he works his way up through the DiMeo crime family, reaching the rank of Captain in 2000, shortly after Anthony "Tony" Soprano becomes the de facto boss. In 2006, Paulie is promoted to underboss, and Christopher Moltisanti is put in charge of Paulie's crew, which earlier was Tony's crew. Paulie got his nickname "Paulie Walnuts" due to hijacking a truck in the early 1990s which he believed to be filled with television-sets, but only contained walnuts[citation needed]. His surname is taken from real life DeCavalcante crime family mobster Frank Gualtieri, who served under Vincent Palermo.

Paulie is one of the show's most colorful characters. A psychopath with little empathy, Paulie is highly paranoid and often refers to supernatural experiences, like déjà vu, seeing the Virgin Mary, and especially his constant fear of death, either natural or probable. Paulie has displayed kindness and loyalty, and usually cracks jokes. However, despite his seniority, Paulie is one of the more eccentric of Tony's associates and is arguably one of the most ruthless, as expressed by his paranoia, mysophobia, competitiveness, miserly nature, impulsive violence and often childlike dependence on Tony's approval. In the first season finale, "I Dream of Jeannie Cusamano," Tony tells his crew that he had been in therapy for almost a year, when Paulie reveals that he too had seen a therapist, from whom he "learned some coping skills." Nevertheless, Paulie is recognized throughout the series as one of the top earners and one of Tony's most trustworthy friends in his "inner circle" of Paulie, Silvio Dante, and Christopher Moltisanti. By the end of the series, he is also the only member of Tony's original core crew that is alive, active, and out of prison.

Paulie has no children, and alone among his colleagues remains single. A girlfriend of Paulie's, played by Judy Reyes, is briefly seen in episode 2.9 ("From Where to Eternity.") In a rare moment, Paulie shows compassion for her two children, putting them back to bed, sadly citing he shouldn't keep everyone up. He is suffering from nightmares after hearing Chris talk about his trip to Hell after being shot. She recommends a psychic, but the session ends with Paulie calling the group a bunch of "fucking queers" after the psychic sees the spirit of Charles "Sonny" Pagano - the first guy Paulie ever whacked - together with other spirits, including Mikey Palmice, who supposedly tells the psychic to ask Paulie if the poison ivy, which he caught on his face while chasing Palmice to execute him, still itches.

In the first season, Paulie is a central member of Tony's crew. He executes a Colombian drug dealer and steals a large quantity of drugs and cash from his hotel room. Other tasks he does are retrieving a car, with Salvatore "Big Pussy" Bonpensiero's help, for a teacher of Tony's son, torturing a hotel co-owner so the crew can own 25% of the business, and extorting a soccer coach by giving him an unwanted free TV. When suspicions that Big Pussy is an informant first surface, Paulie volunteers to investigate (and murder if necessary). His method of taking Pussy to a bath house and trying to get him to undress for a steambath lacks subtlety and drives Pussy into hiding. In Tony's brief and bloody war with Corrado "Junior" Soprano's crew, following Junior's attempt on Tony's life, Paulie is assigned the hit on Junior's consigliereMikey Palmice, with assistance from Christopher Moltisanti.

In the second season, when Tony becomes the family's street boss, while Junior remains boss only in name, Paulie is promoted to capo of Tony's old crew. This meant that Pussy, Chris, and Furio Giunta amongst others, report to him. To help set up the crew's stolen car distribution operation, Paulie travels with Tony and Chris to Italy. Paulie also helps run the "executive game," a high-stakes poker game. In the episode "From Where to Eternity," while Chris is in the hospital recovering from the bullet wounds caused by Matthew Bevilaqua and Sean Gismonte's failed assassination attempt (which was engaged in to gain recognition in the Soprano crime family, particularly with Richie Aprile), when Chris becomes clinically dead for a few minutes after his heart stops while in his comatose state, he has what may have just been a morphine-induced dream in which he visits purgatory and sees his deceased father "Dickie" Moltisanti along with his deceased former best friend Brendan Filone and Mikey Palmice, who had slain Brendan. Ironically, Brendan and Mikey are good friends in the afterlife and even gamble together with Roman soldiers against Irish gangsters to whom they constantly lose, according to Christopher's description of what was going on in his ephemeral visit to the realm between Heaven and Hell. Chris informs Tony and Paulie that Mikey had a message for them: Three o'clock is what Mikey told Chris to tell them. It is never actually revealed what this esoteric message is supposed to mean, although Paulie thinks it could have been around the time Mikey was executed. Christopher's spiritual experience, which Tony remains skeptical of and deems just a dream, spooks Paulie intensely.

Paulie subsequently begins to have nightmares of being dragged to Hell. Paulie, at the recommendation of his mistress, goes to see a medium but to confirm for sure the guy is real, Paulie gives a pseudonym when he calls and makes his appointment. Much to Paulie's chagrin, the authenticity of the medium seems to be confirmed when he apparently begins communicating with Charles "Sonny" Pagano who was the first person Paulie ever whacked, as well as Palmice. It becomes abundantly clear that Mikey's spirit could be present when the medium informs Paulie that "he" wants to know if the poison ivy still itches (Paulie had inadvertently run into a batch of poison ivy while he and Chris chased Mikey through the woods). Paulie abruptly flips out, grabs the medium, and asks who he's been talking to, as he feels he somehow got some very clandestine information on Paulie through a living person. Paulie continues to remain spooked and paranoid, as he also feels he's being haunted by Palmice accompanied by others he had murdered throughout his criminal life. However, a skeptical Tony informs him that it means nothing. Later in the season, when it is confirmed that Pussy was an informant for the Federal Bureau of Investigation, Paulie accompanies Tony and Silvio Dante on their trip out on a boat to execute Pussy. Paulie, right before the execution is carried out, tells Pussy "you were like a brother to me," at which point Tony adds, "to all of us."

In the third season, Chris often chafes under Paulie's leadership, particularly after Chris becomes a made man in Paulie's crew. Paulie begins to demand regular payments and subjects Chris to humiliating random strip searches for wires. One night, Paulie and Patsy Parisi show up unexpectedly at Christopher's apartment and search it for wires; they also confiscate some stolen shoes Chris got for Adriana to give to their mistresses. While meddling through a dresser drawer, Chris observes Paulie sniffing Adriana's panties, about which he later complains to Tony, who informs Paulie that he must apologize. Paulie grows angry at Christopher's tattle-telling and informs him, "If you ever go to the big man [Tony] again about stuff between you and me, we're gonna have a problem, my friend." The tensions between Paulie and Chris culminate in "Pine Barrens" when Tony assigns Paulie and Chris the task of collecting a payment owed to Silvio by a Russian mobster named Valery. They botch the simple assignment after they get into a fight with Valery at his apartment. Believing Valery is dead after Paulie chokes him with a lamp, they take Valery out into the Pine Barrens to dispose of him. Valery, who is later revealed to be a former Russian military commando, is still alive, and knocks both Paulie and Chris to the ground with a shovel. He escapes and leads Paulie and Chris on a brief chase in the woods. Paulie shoots Valery in the head; however, he and Chris are unable to find the seemingly mortally wounded Valery, and the two are dumbfounded as to what happened to him. Afterwards, Paulie and Chris decide to get in the car and look for him, but they lose their way. The two try continuously to communicate with Tony on a cell phone to get him to come pick them up but as they are deep in the woods, the signal is weak, and every conversation becomes incomplete by static and disconnection. Paulie and Chris feud throughout the night. They become hungry, extremely cold, tired, and frustrated with each other. Later, a heated exchange prompts Chris to pull his gun and threaten to kill Paulie. The next morning, they are rescued by Tony and Bobby Baccalieri, but Tony is disappointed at Paulie's failure to complete such an easy task.

In the season finale "Army of One," Paulie grows upset after Tony rules against him in a sit-down with Ralph Cifaretto. Paulie, who had provided Ralph with the security codes he needed to execute a $100,000 robbery, demands 50% of the take. Ralph counters by offering only $5,000, claiming Paulie had not done any of the legwork. Ultimately, Tony rules that Paulie is entitled to $12,000. Paulie, who had just put his mother in the expensive Green Grove retirement community, is especially angered by the ruling, as he had been depending on the $50,000 to cover his expenses. Paulie also grows jealous of Ralph's earning ability, which outpaced Paulie's because of Ralph's labor union ties, which helped bring in the highly lucrative Newark Esplanade project.

Between the third and fourth seasons, Paulie is arrested in Youngstown, Ohio on a gun possession charge. Although no censure was rendered upon him, Paulie's separation from the family, combined with Ralphie's continued earning abilities, continues to erode his reputation and credibility in Tony's eyes. During his four months in jail, he communicates with John "Johnny Sack" Sacramoni, the underboss of New York's Lupertazzi crime family, while under the false impression that he could earn a place with them. It is Paulie who tells Johnny Sack that Ralph Cifaretto made a very insensitive joke regarding Ginny Sack's weight, which compels an infuriated Johnny to sanction a hit on Ralph that is called off at the last minute. A party is thrown at the Bada Bing when Paulie is released, but his wavering loyalty only serves to accelerate his marginalization. Paulie, however, by the end of the season, realizes he had been duped by Johnny Sack and that Carmine Lupertazzi had never even heard of him, much less offered him a place in his New York family. Following this realization, Paulie once again devotes himself fully to Tony and the Soprano family, reclaiming his status as a top earner.

Paulie has always been devoted to his mother, Marianucci "Nucci" Gualtieri, whom he has watched over constantly. She is delighted when he first places her at Green Grove (in stark contrast to Livia Soprano's reaction), and Paulie also intercedes in her social problems with the other residents, going so far as to attack their relatives to ensure civility for his mother. He later learns that one of the women Nucci had trouble with, Minni Matrone, keeps all her cash in her home. Paulie breaks into Minn's home to try to steal this money, but she catches him in the act. When he fails to talk his way out of it, he suffocates her with a pillow. He gives the money to Tony, which rejuvenates his confidence in Paulie.

In the fifth season, Chris and Paulie's bad blood resurfaces when Chris reiterates the story of the Pine Barrens incident to Vito Spatafore, Patsy Parisi, and Benny Fazio. The story starts out friendly, but after Chris embarrasses him in front of the guys, Paulie calls Chris "Tony's little favorite." This leads to Chris and Paulie almost starting a fight and later, Paulie tells the rest of the guys that it's over between the two of them. At comare night, Chris refuses to pay for dinner, forcing Paulie to pay. At Satriale's the following morning, Paulie demands the money back, or else Chris would begin paying points. At another dinner in Atlantic City, Paulie tells everyone to choose whatever they want in order to inflate Christopher's bill. Tapped out, Chris leaves a small tip and argues with Paulie in the parking lot until the waiter comes out to confront them. Chris responds violently and throws a brick at him. The waiter collapses and goes into convulsions. Panicked, Paulie shoots the waiter and retrieves the $1,200 in cash before running away. Paulie later calls Chris and they agreed to "bury the hatchet," and split the tab. While this seems to Chris like a fair compromise, it essentially means that Paulie is profiting from the whole situation by only returning half of the cash he stole from the dead waiter.

Paulie also gets into a dispute with Michele "Feech" La Manna over their rival landscaping companies. Paulie and Feech both resort to violence, assaulting the other's gardeners. Paulie's competition with and antagonism of Feech serves to highlight Feech's insubordinate tendencies, which cause Tony to "set up" Feech for a return to prison, making it easier for everyone.

Between the fifth and sixth seasons, Chris is made Capo of Paulie's crew, with Paulie being elevated to underboss, albeit a nominal one. Paulie's reputation for withholding money from his payments "up the ladder" is observed in "Mayham." While Tony is in a coma, Paulie takes part in a heist with Cary De Bartolo that leads to a score of $1,000,000 in Colombian drug money, which is to be divided up fairly in terms of percentage amongst Tony, Paulie, and Vito. The heist resulted from a tip by Vito Spatafore. Although they had agreed to split the acquisition, Paulie later tries to withhold some of Vito's share due to an injury he had received during the heist; Silvio has to mediate as acting boss, informing them that under the circumstances, Tony's share would be given to Carmela. Vito and Paulie are strongly reluctant to give Tony's share to Carmela, as they speculated Tony could potentially die at any moment but in the end accept. When Vito's homosexuality is later revealed, Paulie is outspoken in his condemnation and desire to see Vito killed. When Vito returns after months in hiding, Tony considers his proposal of setting up business in Atlantic City with Silvio in front of Paulie; Paulie remains quiet, but leaves the room in apparent protest. Tony largely decides to have Vito killed because Paulie's attitude mirrors the lack of respect his underlings would feel for him letting Vito live free, although Phil Leotardo makes it a moot point when members of his family beat Vito to death.

In "The Fleshy Part of the Thigh," Paulie learns that his dying aunt Dotty, a nun, was actually his mother. She had become impregnated by a soldier identified only as "Russ" during World War II. Nucci, the woman Paulie had thought of as his mother, is really his aunt who took him in to hide the scandal. This news sends Paulie into an emotional tailspin, in the grips of which he severed his ties to Nucci and does not attend Dotty's funeral. The episode ends with Paulie extorting $4,000 per month (the sum of Nucci's retirement home costs) from the son of the late owner of the Barone Sanitation company, unbeknownst to Tony. Earlier, Paulie had witnessed Helen Barone meet with Tony to intercede on her son's behalf, and Tony promised that he would not be harmed; hearing this conversation leads Paulie to break down emotionally. This means that Little Paulie Germani is not his nephew, but his first cousin once removed, although he still refers to Little Paulie as his nephew.

In "The Ride", Paulie is responsible for organizing the annual festivities at the Feast of St. Elzear. Paulie had taken over running the festival from Johnny Boy Soprano upon his death, and continues to try to run it for profit. In 2006, it proves a burden—the replacement priest, Father José, tries to renegotiate the payment the church would receive. Paulie refuses to pay, and Father José retaliates by refusing to allow St. Elzear's gold hat to be used in the festival. The hat's absence is noticed and complained about by elder residents. Ride maintenance is another area where Paulie decides to save money, which results in a malfunction while Bobby Baccalieri's family was on a ride. Janice receives minor neck injuries. Subsequently, this results in temporary bad blood between Paulie and Bobby which Tony orders to be resolved.

During the festival, Paulie is tested for prostate cancer because of an elevated PSA. With his uncertain parentage, there is no way of knowing if he was genetically predisposed to the disease or not. During a restless night awaiting his results, Paulie awakes at 3 a.m. and goes to the Bada Bing. There, he has a striking vision of the Virgin Mary hovering above the stage. Paulie later visits Nucci at Green Grove, and they have a silent reconciliation. In "Moe N' Joe," Paulie tells Tony that he has been diagnosed with prostate cancer. The disease was apparently caught in an early stage, and Paulie undergoes radiation therapy. Paulie suggests that his luck at having been diagnosed early was a reward for good deeds in his life, and Tony agrees with him. He states in "Stage 5," that he beat the cancer, after learning of Johnny Sack's death from lung cancer.

In "Remember When," Paulie and Tony leave for Miami to lie low while the FBI investigate the old case of Tony's first murder victim, Willie Overall. On the trip and in Miami, Paulie begins to reminisce about the old days, at which point he brings up Pussy Bonpensiero and Ralph Cifaretto and how they all four went out to dinner the night Tony whacked Willie. Tony begins to grow somewhat suspicious of Paulie's idiosyncrasies and inclination to divulge information to other people, and Tony questions him several times about the joke Ralph made about Ginny Sacrimoni's weight. Eventually, Overall's murder is blamed on the deceased Jackie Aprile, Sr., so Tony takes Paulie on a fishing trip to celebrate. Paulie has serious misgivings about going to sea with Tony due to the boat trip that was used to lure Pussy to his death. On the boat, Paulie continues to deny informing Johnny Sack of Ralph's joke about his wife. While Tony seriously considers murdering Paulie, he ultimately decides to spare his life. Seemingly out of "gratitude", Paulie sends Carmela a $2,000 espresso machine to replace her broken one. The overly expensive gift gives the impression of Paulie to Carmela that "there is something seriously wrong with that man," but Tony defends him, saying it was people like Paulie who allow Tony and Carmela to live the way they do.

In "Walk like a Man," Paulie's nephew, Little Paulie, is beaten by Chris and thrown out a second-story window. A furious Paulie tears up Christopher's lawn with his car, leaving Christopher's wife shaken. Later in the episode, they seem to have made up, and drink together at the Bada Bing. However, Paulie makes off-color remarks about Christopher's daughter, which cause an inebriated Chris to storm out and later kill his AA friend J.T. Dolan. In "Kennedy and Heidi," Paulie is left surprisingly grief-stricken when Chris is killed, reflecting that their argument over money and respect was trivial and that he should have been nicer to him in life. Paulie is later "upstaged" when his aunt/adopted mother Nucci passes away and her wake is under-attended because his friends are at Christopher's wake instead. In the final episode "Made in America," Tony asks Paulie to take over the old Aprile/Cifaretto/Spatafore/Gervasi crew. At first, Paulie is hesitant because all the bad luck that had befallen that crew's previous capos, but changes his mind after clever persuasion. With an ongoing war between the New Jersey and New York crime families, Tony and Paulie attend a sitdown with the New York crew, who agree to a truce to end their war. When they make an offer, Tony looks to Paulie, who nods in agreement.

When given control of the Soprano crew, Paulie oversees all of Tony's old business dealings, including the Paving Union, extorting drug dealers, the pump and dump scams, charging HMOs for fake MRI expenditures, fencing stolen cars, a phone card scam, gambling, loan sharking and the crew's front businesses: Barone Sanitation and Massarone Construction. Throughout the series, other aspects of the crew's criminal activities develop or are revealed. These include control of the Joint Fitters Union, credit card hijacking, betting shops, cigarette smuggling, and protection rackets. Legitimate businesses include Pussy's auto body shop (now run by his wife Angie), silent partner in a lawn care business, and the Feast of St. Elisario. Paulie soon becomes Tony's biggest earner. However, by the fourth season, Paulie's businesses hit a low point, especially in comparison to the Cifaretto and Barese crews. By the fifth season, Paulie's crew regains its position as one of the family's best earners. When Paulie is promoted to underboss between the fifth and sixth seasons, Chris becomes Capo of his old crew.

In "Commendatori," when Paulie still believes that Nucci is his mother, he mentions having two brothers and a sister. Only Gerry and Rose are mentioned by name in the series; one of the brothers is a doctor.

In the series finale, Tony mentions a niece of Paulie's who has MS. Because it now is known that Paulie has no siblings, he is referring to one of his cousin's/"siblings'" children.